Looking forward, employers will no doubt welcome opportunities to grow and develop their businesses.

However, whilst we would hope that 2023 will be prosperous for commercial activity, given the current economic pressures on most businesses, employers may also be looking at ways to reduce their overheads while maintaining profitability.

It is imperative that when an employer reaches the difficult decision that it must reduce its employee headcount to remain financially healthy, it must ensure that it acts in accordance with the law when doing so.

Generally speaking, this type of issue will give rise to a redundancy consultation process. In other words, where an employer is proposing to make staff redundant, it must ensure that a meaningful consultation process is followed with either the individual employee, or elected representatives, depending on how wide the proposal is and how many employees are at risk of redundancy.

The term “redundancy” is well known although often misused. In situations involving business or workplace closure, reduction in work coming in, or the expectation of a reduction in incoming work, the situation is likely to be governed by redundancy law. Similarly, where automation, for example, has reduced the need for a particular kind of employee, redundancy law is likely to apply.

In other circumstances, such as a decision to restructure or “re-design” a workforce, the employer may have to comply with a different set of legal obligations. Choosing the wrong process at the outset can lead to the business facing an unfair dismissal claim in the employment tribunal. Employees with two years’ service or more automatically acquire the right not to be unfairly dismissed. Any failure to follow the appropriate legal process may result in an employment tribunal claim.

To avoid this happening, it is essential that the employer carefully considers, firstly, why it is considering dismissals and, secondly, whether that reason falls under the legal meaning of “redundancy”. Once this has been done, it will be necessary to look at how it can best follow a fair redundancy consultation process.

The purpose of any redundancy consultation process is to give the employer a legal framework that will allow it to treat the affected employees fairly, and allow the employer to make the right decision for its business. Unfortunately, many small employers get it wrong and end up in the employment tribunal because they simply decide to “make redundancies” without any process.

The redundancy consultation process is called a “process” because employers need to follow a certain minimum number of steps in order to demonstrate that any resulting dismissals have been fair.

A fair redundancy process will involve several consultation meetings with the affected employees, initially as a group announcement to the potentially affected employees, and then by way of some individual consultation meetings with each affected employee. There may also be a requirement to consult with elected representatives, rather than the individual employees, depending on how many employees are at risk of redundancy.

In most cases, particularly where several employees are to be affected, it will also be necessary to carry out a selection process to identify which employees are to be made redundant. Employees who are made redundant are entitled to a statutory redundancy payment, as well as their usual notice entitlement and any accrued, but untaken, holiday entitlement.

Voluntary redundancy packages are sometimes offered at the start of a redundancy process, but an employer is under no obligation to either offer voluntary redundancy or accept applications for voluntary redundancy from key employees it wishes to retain.

Dawn Robertson is a partner at BTO Solicitors